American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Profiting from Most-Favored-Customer Procurement Rules: Evidence from Medicaid
American Economic Journal: Economic Policy
vol. 15,
no. 2, May 2023
(pp. 166–97)
Abstract
Using a difference-in-difference approach, we find that an increase to Medicaid's minimum drug rebate under the Affordable Care Act in 2010 lowered non-Medicaid drug spending by 2.5 percent. A stylized bargaining model shows that this is likely driven by the interaction of this reform with Medicaid's "most-favored customer" clause (MFCC). By examining the response of drugs that faced a change in incentives equivalent to the removal of Medicaid's MFCC, we estimate that removing the Medicaid MFCC would have reduced overall 2010 non-Medicaid drug spending by an additional 3.5 percent, though it would have likely also increased Medicaid spending.Citation
Feng, Josh, Thomas Hwang, and Luca Maini. 2023. "Profiting from Most-Favored-Customer Procurement Rules: Evidence from Medicaid." American Economic Journal: Economic Policy, 15 (2): 166–97. DOI: 10.1257/pol.20200688Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- H51 National Government Expenditures and Health
- I18 Health: Government Policy; Regulation; Public Health
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
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